Principals delegate to an agent in the context of the Nash bargaining model, but communicate instructions to their agents imperfectly. Numerical methods are used to find a unique equilibrium in the principals' strategies. Agents fail to agree with a positive probability, invoking a secondary...

This article presents a positive model of investment choices by regulated firms that offers rational explanations for electric utilities' recent behavior of delaying investment and choosing smaller, shorter-lead-time technologies. The model assumes that firms' capital investments require long...

This article presents new tests for finance constraints on investment by emphasizing the often-neglected role of working capital as both a use and a source of funds. The coefficient of endogenous working capital investment is negative in a fixed-investment regression, as expected if working...

This article investigates the role of noise in a multidimensional signalling game. A monopolist that offers a high- or low-quality product can signal its quality to consumers through its selection of price and advertising. It is shown that when the advertising channel is noisy there is no...

This article focuses on the regulation problems raised by two specific characteristics of research and development: first, it is normally desirable that several units pursue the same goal, and second, that only the best of the final products made by these units is worthwhile to society. When...

Firms that generate negative externalities may consider the effects of their location on the surrounding environment because of the right of their prospective neighbors to demand compensation for pollution and raise the transaction costs of location. Since communities vary both in the value...

We study an entry game under perfect information, with the salient feature that capacity is resalable. We show that an inability to precommit (to final output) can help rather than hurt. In contrast to other analyses of limited commitment (e.g., Maskin-Tirole (1988)), which do not specify the...

Horizontal subcontracting agreements between rival firms, each of which is capable of producing and marketing its products independently, are common. This article explains this practice and evaluates its welfare implications. The analysis shows that firms with asymmetric convex costs can use...

In this article we construct a general duration model of technology adoption that incorporates the main factors discussed in different theories of diffusion of new process technologies. The model is applied to data on diffusion of CNC in the UK engineering industry. Although we find strong...

I show that a middleman can be welfare improving in all equilibria in a quite general bargaining model when adverse selection is present. Conditions are determined for when a middleman is most likely to be in a market. Examples of the theory are also presented.